Waller’s Remarks on Interest Rates

1. Federal Reserve Governor Christopher Waller has suggested that the FOMC should consider a 25 basis point cut during the upcoming July meeting.
2. Waller has expressed concerns about the uncertain long-term outlook for the Fed’s fund rate, indicating that a target of around 3% appears appropriate.
3. It’s interesting to note that a Federal Reserve blackout period is about to commence as the July meeting approaches.
4. Waller’s comments in the Wall Street Journal show strong backing for potential rate cuts this month.

Other Economic News

• This week, China’s central bank injected 1.3 trillion yuan into the market.
• For New Zealand, credit card spending in June 2025 saw an increase of 0.9% year-over-year, a drop from the previous 2.0% growth.
• China’s Commerce Minister stated that the economic and trade relations between China and the US are currently facing significant challenges.
• In a bold move, China has threatened to block transactions at the Panama Canal Port as it seeks ownership of certain sections.
• China’s Minister forecasted retail sales will surpass 50 trillion yuan by 2025.
• Questions surrounding the Trump/Epstein connection have intensified, with Trump calling for the release of certain testimonies.
• The PBOC set today’s USD/CNY reference rate at 7.1498, which is lower than the estimated 7.1736.
• According to the Wall Street Journal, there’s an optimistic perspective suggesting that Japan’s consumer inflation might ease.
• As Japan heads to the polls this weekend, market participants are closely monitoring financial indicators.
• Canada’s International Trade Minister has expressed a desire to communicate with China to address trade matters as soon as possible.
• Japan’s CPI figures for June 2025 significantly exceeded the Bank of Japan’s target rate.
• The Wall Street Journal published articles related to Epstein that the White House preferred not to release.
• In case you missed it, the US House recently passed three major cryptocurrency bills.
• Moreover, Reuters reported that the dismissal of Judge Rule’s FTC Commissioner was deemed unlawful.
• Fed Chair Powell emphasized that the Federal Reserve prioritizes transparency.
• Furthermore, the Financial Times indicated that Trump aims to broaden access to US retirement markets for cryptocurrency investments.
• Trump has expressed slight health concerns, mentioning swelling in his legs and minor bruising but is reportedly fine, according to a recent report.
• The Forex Live update showed that Fed members are adopting a more cautious stance as US economic data strengthens.
• Lastly, an earthquake measuring 5.4 struck near Antofagasta, Chile.
• In market news, the primary US indexes closed on a high note, with NASDAQ enjoying its best performance yet and Netflix reporting substantial revenue.
• On July 18th, trade ideas indicated a bearish outlook, accompanied by insightful charts and technical analysis.

The early session news appeared to be encouraging, with Trump reportedly set to sign an executive order that would allow for alternative investments in 401(k) retirement plans beyond just traditional stocks and bonds.

Additionally, the US House has passed three significant cryptocurrency bills aimed at establishing regulatory structures.

• The first bill focuses on laying down guidelines for regulatory stability.

• The Clarity Act seeks to outline the overall market structure for cryptocurrency.

• The third piece of legislation proposes a ban on central bank digital currencies (CBDC).

The cryptocurrency markets experienced an uptick, with ETH/USD reaching its peak since January 7, 2025.

On the Federal Reserve’s side, Waller reaffirmed his support for a 25 basis point cut in the upcoming meeting, pointing to increasing negative risks and a decrease in labor market indicators. He noted that waiting too long could necessitate more drastic cuts.

Waller also noted that tariff-induced inflation is likely temporary, asserting that core inflation is near the Fed’s target in the absence of trade-related pressures. He perceives limited downward risks to inflation, mentioning GDP growth hovering around 1% and the private sector nearing a slowdown. He suggested that a cut in July might allow the Fed to maintain some flexibility in the following months.

Though several analysts have highlighted that weakness in the labor market seems scarce, it’s not entirely clear if Waller shares the same perspective.

During this session, the US dollar saw a notable drop, with the DXY index decreasing by about 1%, benefiting currencies like the EUR, AUD, NZD, GBP, and CHF. Waller’s comments appeared to trigger this movement, which is particularly interesting considering that only he and Bowman openly backed the July cut, while others in the FOMC have indicated a preference for maintaining rates.

The Federal Reserve’s blackout period is set to start on Saturday and continue until July 31st.

From Japan, the CPI data for June indicates that all three key metrics have remained above the Bank of Japan’s 2% target:

• Headline CPI: +3.3% year-over-year, aligning with the forecast but down from 3.5%.

• Core CPI (excluding fresh food): +3.3% year-over-year, matching the forecast but down from 3.7%.

• Core Core CPI (excluding fresh food and energy): +3.4% year-over-year, slightly above forecasts and unchanged from the previous period.

The USD saw some buying interest, yet the stronger CPI figures offered some support to the currency. Meanwhile, in China, the People’s Bank has injected 1.3 trillion yuan into the banking system this week, marking the largest short-term liquidity injection since January, driven by increased tax payments and government bond issuance. Daily injections peaked mid-week before settling at 100 billion yuan on Friday.

On the political front, the Wall Street Journal published a report detailing the close ties between Trump and Jeffrey Epstein, leading to Trump’s threats of legal action against the newspaper and its owner, Rupert Murdoch. He’s also pressed for the release of some documents related to the matter.

In the Asia-Pacific region, stocks have generally benefited from positive handovers after US markets reached new record highs:

• Australia (S&P/ASX 200): +1%

• Hong Kong (Hang Seng): +1%

• Japan (Nikkei 225): -0.3%

• Shanghai Composite: +0.5%

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Wishing everyone a wonderful weekend! We will transition from Forexlive to Investinglive on Monday.